U.S. Sen. Ron Wyden (D-OR), chair of the Senate Finance Committee, launched an investigation into the tax practices of medical company Abbott following the closure of its baby formula plant.
Specifically, Wyden wants to know whether the company used its windfall from the 2017 tax cuts to enrich executives and shareholders rather than ensure the safety of the manufacturing plant that produces infant formula. The plant closed in February after the Food and Drug Administration found contaminants in the facility. Abbott recently reached an agreement with the FDA to reopen the plant in compliance with FDA regulations.
Since the passage of the 2017 tax cuts, Wyden stated that Abbott has saved billions in taxes and seen its effective tax rate decline to levels well below the statutory rate of 21 percent. Wyden pointed out that Abbott paid an effective tax rate of 9.6 percent in 2019, 10 percent in 2020, and 13.9 percent in 2021.
“Abbott has also recorded profits in the midst of a global pandemic. Last year Abbott’s net earnings in 2021 soared to $7 billion, a 91 percent increase from 2019. Since the pandemic began, Abbott’s global sales have climbed from $31.9 billion in 2019 to over $43 billion in 2021. As Abbott generated massive profits, it rewarded investors last December by authorizing $5 billion on stock buybacks to boost the company’s share price. This is in addition to the $3 billion on stock buybacks Abbott already authorized at the end of 2019,” Wyden wrote in a letter to Abbott Chair and CEO Robert Ford.
Wyden chided Abbott for the buybacks when they could have used the money to make repairs to their infant formula manufacturing plant in Michigan.
“As a result of the company’s mismanagement, the plant’s condition deteriorated to the point where it was shut down by the Food & Drug Administration (FDA) in February over safety concerns after several infants who consumed formula made at the plant fell ill from bacterial infections. The FDA subsequently warned consumers not to use formula made at the plant, and Abbott issued a nationwide recall. The closure of the plant has contributed substantially to a national shortage of infant formula, putting families across the country at risk,” he wrote.
Wyden asked Abbott officials to provide answers to several questions, including questions about how Abbott’s effective tax rate declined, its stock buybacks, capital investments in the infant formula manufacturing facility in Michigan before its closure earlier this year when it first became aware of the safety issues that eventually led to the shutdown of the infant formula manufacturing plant, and how much it plans to invest to reopen it.